CPC Blend crude oil loadings continue as operator appeals suspension ruling

Loadings of Kazakhstan's CPC Blend crude oil are continuing uninterrupted as the operator of the Black Sea loading facility appeals a Russian court order suspending its activity for 30 days, sources said July 6.

The order by a district court in Novorossiisk, following a demand by Russia's transportation inspectorate, represents a blow to landlocked Kazakhstan as the CPC route handles the bulk of its crude oil exports -- as high as 1.5 million b/d.

However, the operator of the loading facility, the Caspian Pipeline Consortium, said it was suspending implementation of the court order pending an appeal based on the risks associated with a hasty unplanned shutdown. These include damage to equipment, "including its destruction," CPC said.

"The possibility of incurring such negative consequences in case of a rapid suspension of activity allows CPC-Russia to appeal for a suspension of implementation of the order of the judges of the Primorsk district court," CPC said.

"In view of the above, CPC-Russia has sent to the [district court] an appeal requesting the suspension of implementation of the order of the judges of July 5."

Separately, California-based Chevron said it was aware of reports of the proceedings in Novorossiisk and was "in communication with CPC to clarify details and next steps."

The company is the largest shareholder in Kazakhstan's Tengizchevroil consortium, which operates the country's highest-producing crude oil field, Tengiz, and is also a partner in the third-highest producing field, Karachaganak, and the CPC operating consortium.

"Currently there are no interruptions to crude shipment via CPC," Chevron said.

CPC had earlier said it was obliged by law to implement the order issued by the district court, saying the court had rejected a request to hear the consortium's objections.

It follows months of legal wrangling with environmental regulators over an August 2021 oil spill at the port.

CPC Blend is exempt from sanctions imposed on Russia in relation to the Ukraine invasion due to the crude being mainly of Kazakh origin, although it contains a small portion of Russian crude, typically 10% of the total.

Kazakhstan is not party to the Ukraine conflict and has resisted Russian calls to recognize breakaway regions of Ukraine.

Export disruptions

Kazakh Prime Minister Alikhan Smailov held a crisis meeting July 6 at which measures for limiting the consequences of the suspension were discussed and a number of instructions given, Kazakh state news agency Kazinform reported.

Kazakhstan's second-highest producing oil field, Kashagan, is currently not producing due to a major planned maintenance turnaround due to be completed by July 15. The operator of the field, the North Caspian Operating Company, told S&P Global July 4 the turnaround was going to plan and the production "ramp-up schedule stays as is and on time."

The standoff follows a series of disruptions at the loading facilities in recent months. These have included more than a month of disruption attributed to storm damage to facilities in March-April. More recently, capacity at the terminal was reduced to enable a seabed survey and removal of World War II munitions prior to repair work, although the impact was limited due to the Kashagan shutdown.

CPC Blend was assessed by Platts at $102.42/b on July 5 on a CIF August basis, a $5.30/b discount to Dated Brent, S&P Global data showed.